The graph shows the frequency of use of the word ‘recession’ in blog posts since the 2nd of August – a few days after the subprime mortgage market woes began to drag on market confidence. January has been a ripper of a month for recession talk, with the US Fed cutting rates in a move that smells of panic, and the US government attempting to push through ‘stimulatory packages’.

But in a nutshell, the chain of events we have to fear is long and complex: US recession -> World recession -> NZ recession. Probability is low.

NZ is buffered by high commodity prices, big fiscal stimulus on the way, and the labour market is pretty tight. Even in a growth slowdown I wouldn’t expect unemployment to rise much. And I don’t expect recessions to last long anywhere with modern monetary policy.

Biggest threat to NZ is housing market collapse. Likely trigger for that is mass emigration (not currently a problem) or big increase in mortgage rates. Global recession, with its likely impact of lower world bond rates and lower tradable inflation, makes me less fearful of mortgage rate increases.